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LINDA WERTHEIMER, HOST:

This is MORNING EDITION, from NPR News. I'm Linda Wertheimer.

RENEE MONTAGNE, HOST:

And I'm Renee Montagne.

It's time for our series Fiscal Cliff Notes.

(SOUNDBITE OF MUSIC)

UNIDENTIFIED MAN #1: On January 1, 2013 there's going to be a massive fiscal cliff of large spending cuts...

UNIDENTIFIED WOMAN: From the painful cuts to the Defense Department, food safety, education...

UNIDENTIFIED MAN #2: The Bush tax cuts, the payroll tax cuts...

UNIDENTIFIED MAN #3: Tax-maggedon.

UNIDENTIFIED MAN #4: It's a cliff.

UNIDENTIFIED MAN #5: Whatever your preferred imagery, it's a really big deal.

(SOUNDBITE OF MUSIC)

MONTAGNE: If the Bush-era tax cuts are not extended, people with very high incomes can expect a big increase in their tax bills. NPR's Tamara Keith looks at two people in the top 1 percent.

TAMARA KEITH, BYLINE: Not many very wealthy people voluntarily release their tax returns. One exception, people running for president.

MITT ROMNEY: I'm proud of the fact that I pay a lot of taxes.

PRESIDENT BARACK OBAMA: I should pay more taxes, and folks in my income bracket should pay more taxes.

KEITH: About 80 percent of Americans would see their taxes go up if all the tax cuts were to expire as scheduled at the end of this year. And nearly 100 percent of the highest income earners would have to pay more, including both the Romneys and the Obamas. Bill Smith is managing director in the CBIZ MHM national tax office. It's a large accounting and tax firm that works with high net worth individuals.

BILL SMITH: Most of the Obamas' income was from wages or from book royalties.

KEITH: In 2011, they had about $500,000 in taxable income, after deductions. If the cuts expire, tax rates on income at just about every level will rise. Smith says the top marginal tax rate will go up from 35 percent to 39.6. For the Obamas, that would work out to a roughly $15,000 to $20,000 tax increase.

SMITH: And so you can see that just the rate differential, the rate increase at the upper end accounts for a fairly high tax increase for the Obamas.

KEITH: But it's nothing compared to the tax increase the Romneys would face.

SMITH: Now you're talking about real money.

KEITH: Not only do the Romneys have a lot more income than the Obamas - about 20 million in 2011 according to their estimated tax returns. But more than half of it comes in the form of dividends and capital gains, taxed at a lower rate. Here's Romney back in January.

ROMNEY: What's the effective rate I've been paying? Well, it's probably closer to the 15 percent rate than anything, because the last 10 years my income comes overwhelmingly from investments.

KEITH: But Smith says much of that advantage would go away if the tax cuts expire.

SMITH: Qualified dividends go from a 15 percent rate, all the way up to 39.6 percent.

KEITH: And long term capital gains rates rise by 5 percentage points. In all, based on the Romney's 2011 income, Smith says they'd see a more than $1 million tax increase.

Tamara Keith, NPR News.

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